January home sales hit highest level in almost 2 years

Published 12:00 am, Wednesday, February 22, 2012

WASHINGTON -- Sales of previously occupied homes rose in January to the highest pace in nearly two years, flashing modest signs of health ahead of the spring-buying season.

The National Association of Realtors said Wednesday that home sales increased 4.3 percent last month to a seasonally adjusted annual rate of 4.57 million. That's the highest level since May 2010.

Home sales have risen in three of the past four months. But they remain well below the 6 million that economists equate with a healthy market.

The report offered a mixed picture of the slowly improving housing market. The number of first-time buyers, who are critical to a housing recovery, increased slightly to make up 33 percent of all sales. That's still below 40 percent, which tends to signal a healthy market.

Sales of homes at risk of foreclosure also increased to 35 percent of all purchases. Those sales hurt the market by lowering broader home prices.

The Realtors group also revised December's sales figures to show a 0.5 percent decline. It had initially reported a 5 percent increase.

Economists say conditions are improving and that could mean further gains this year. Prices have declined. Mortgage rates have never been lower. Homebuilders are slightly more hopeful because more people are saying they might be open to buying this year -- and they responded in January to that interest by requesting more permits to construct single-family homes.

Much of the optimism has come because hiring has picked up. More jobs are critical to a housing rebound. In January, employers added 243,000 net jobs -- the most in nine months -- and the unemployment rate fell to 8.3 percent, the lowest level in nearly three years.

Economists caution that the damage from the housing bust is deep and the industry is years away from fully recovering. Since the bubble burst, sales have slumped under the weight of foreclosures, tighter credit and falling prices.

Many can't qualify for loans or meet higher down-payment requirements. Even those with excellent credit and stable jobs are holding off because they fear that home prices will keep falling.

Sales are measured when buyers close on homes. Another problem is that many deals are collapsing before that point. Deals have been scuttled after banks declined mortgage applications, home inspectors found problems, appraisals showed a home was worth less than the bid, or a buyer lost a job.

The high rate of foreclosures has made resold homes cheaper than new ones. The median price of a new home is roughly 30 percent above the price of one that's been occupied before -- twice the normal markup. Investors are taking advantage of the discounts.